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Tuesday, May 17, 2011

State clean energy mandates have little effect on electricity rates so far

One of the larger reviews of renewable portfolio standards was a 2008 report (PDF) from the Lawrence Berkeley National Laboratory. The study looked at data on a dozen state renewable policies enacted before 2007. The estimated impact on electricity rates varied by state, but it was a fraction of a percent in most cases and just over 1 percent in two states, Connecticut and Massachusetts. “There is little evidence of a sizable impact on average retail electricity rates so far,” the report concluded.

One of the report’s co-authors, Galen Barbose, said in an interview that they are collecting data for an updated version of the report. So far he said he hasn’t seen any new information to suggest their conclusion about rate impacts will change significantly in the next edition.

A 2009 study by the U.S. Energy Information Administration modeled the potential impact of a 25 percent nationwide renewable electricity standard. It, too, noted that rate impacts would vary by state, with renewable-rich regions like the Great Plains and Northwest meeting the targets more easily. Overall, though, it projected no impact on rates through 2020, followed by a less than 3 percent increase by 2025. By 2030, however, it projected little difference in rates with or without a national renewable mandate.

The Minnesota Free Market Institute and American Tradition Institute reached a very different conclusion in an April 2011 report (PDF), which claims Minnesota’s renewable electricity standard is going to cause rates in the state to skyrocket by as much as 37 percent by 2025.

Utilities’ experiences varyXcel Energy, the state’s largest utility, has come up with a much smaller number: $0.003. That’s the difference Xcel forecasts between its projected per-kilowatt-hour energy price in 2025 under its proposed wind expansion plan compared to a hypothetical scenario in which it stopped adding new wind capacity after 2012.

Asked to comment on the Free Market Institute’s study, Xcel Energy spokesman Steve Roalstad said, “It doesn’t seem to be moving in that direction.” The cost of adding renewable energy sources, especially wind, continues to fall and has become very competitive with traditional generating sources, he said.